Negotiations on Incheon Airport Rent Left Only Shinsegae and Grand Duty-Free Shops Remaining

Final Negotiations with Existing Operators Shinsegae and Grand Duty Free
Conclusion by End of This Month, Industry "Positive"

On the 18th, the arrival hall of Terminal 1 at Incheon International Airport is deserted due to the impact of the novel coronavirus (COVID-19). Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Lim Hye-seon] Shinsegae and Grand Duty Free, caught in a tight spot due to the operation of the Incheon International Airport Terminal 1 duty-free shops, are in final negotiations with Incheon International Airport Corporation over the rent calculation method. Although Lotte and Shilla Duty Free have agreed to apply a 'sales-linked system' for rent until February next year, the extended operation period of Terminal 1 duty-free shops, existing operators must pay rent based on the 'minimum guaranteed amount' method again starting from September, when rent reduction benefits end.

According to the duty-free industry on the 22nd, Incheon International Airport Corporation has decided to temporarily apply the rent for Shinsegae and Grand Duty Free under the 'sales-linked system' instead of the 'minimum guaranteed amount.' Shinsegae Duty Free must operate the Terminal 1 DF1 (cosmetics and perfumes) and DF5 (fashion and accessories) zones until 2023, while Grand Duty Free must operate the DF11 (all items) zone.

In the early-year bidding for the Incheon Airport Terminal 1 duty-free business rights, the DF2 (perfumes and cosmetics), DF3 (tobacco and liquor), DF4 (tobacco and liquor), DF6 (fashion and accessories), DF9 (all items), and DF10 (all items) zones faced vacancy risks due to failed bids and withdrawal of priority negotiation contracts. As the COVID-19 pandemic prolonged, causing a sharp decline in travelers, airport duty-free sales plummeted by more than 90% compared to the same period last year, making it impossible for duty-free operators to bear monthly rents amounting to hundreds of billions of won. Only existing operators Shinsegae Duty Free, Grand Duty Free, and newly selected operator Hyundai Department Store Duty Free for the DF7 (fashion and accessories) zone remain at the airport. Hyundai Department Store Duty Free will open a temporary store during the interior construction period, during which rent is usually paid based on the sales-linked system. A duty-free industry official explained, "Although the average interior period is one month, Hyundai Department Store Duty Free is expected to maintain the temporary store until the end of the year due to decreased passenger demand caused by COVID-19," adding, "I understand that they negotiated with the corporation when they were the only large company selected as an operator earlier this year."

So far, companies have been anxious about potential 'reverse discrimination,' similar to the case of Lotte Duty Free at Gimpo Airport. Lotte Duty Free does not operate a store at Gimpo Airport but still pays fixed rent according to the contract. This is because duty-free shops contracted after 2018 apply the 'sales-linked rent system,' while those contracted before 2018 have fixed rent contracts. As a result, Lotte Duty Free is the only operator required to pay rent at Gimpo Airport.

Fortunately, the atmosphere between Shinsegae and Grand Duty Free is not bad. A duty-free shop official said, "Shinsegae and Grand Duty Free are conducting multiple negotiations with the corporation," and "It will be decided by the end of this month how rent reductions will be applied." Shinsegae and Grand Duty Free currently pay approximately 36 billion won and 1.2 billion won per month, respectively, to the corporation in rent.

This content was produced with the assistance of AI translation services.